Stock Analysis

Suga International Holdings (HKG:912) Is Paying Out Less In Dividends Than Last Year

  •  Updated
Source: Shutterstock

Suga International Holdings Limited's (HKG:912) dividend is being reduced from last year's payment covering the same period to HK$0.06 on the 25th of August. However, the dividend yield of 9.0% is still a decent boost to shareholder returns.

Check out our latest analysis for Suga International Holdings

Suga International Holdings' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, Suga International Holdings is earning enough to cover the payment, but then it makes up 1,564% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

EPS is set to fall by 2.2% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 59%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

SEHK:912 Historic Dividend July 14th 2022

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was HK$0.15 in 2012, and the most recent fiscal year payment was HK$0.12. This works out to be a decline of approximately 2.2% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Suga International Holdings has seen earnings per share falling at 2.2% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Suga International Holdings' Dividend Doesn't Look Sustainable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Suga International Holdings has 3 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

Find out whether Suga International Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis